GILMORE COMMENTS:THE REPUBLIC should be allowed to tap the euro zone's financial rescue fund (EFSF) to cut the cost of its bank bailout and boost its chances of becoming Europe's recovery success story, Tánaiste Eamon Gilmore has said.

The EU should also introduce eurobonds to tackle the euro zone crisis but steer clear of reform that would require fundamental changes to the EU treaties, Mr Gilmore said in an interview with the Financial Times.

“The banking problems of one country are connected to the banking health of another country,” Mr Gilmore said. “There is an interconnectedness there. In terms of the Irish situation, I think the gain for Europe is that Ireland is now the best prospect of a recovery story.”

The Government is lobbying Brussels and EU states for help to reduce the cost of the bailout without hitting bondholders. One proposal is to borrow from the EFSF at low interest rates to pay off €31 billion in promissory notes it issued for the recapitalisation of Anglo Irish Bank and Irish Nationwide Building Society.

The proposal could save billions on the interest bill, estimated to cost up to €17 billion over 20 years, and help the country’s recovery. “We are doing what we have to do and we are succeeding. Obviously, we look to partners to co-operate with us,” said Mr Gilmore.

“I’d like to see eurobonds as part of a menu of options and measures that are available to Europe to deal with the crisis, but I don’t think on their own they are a silver bullet. That menu is developing, particularly the flexibilities that were introduced to the EFSF in July.”– Copyright The Financial Times Limited 2011